- 59% of orders are to acquire the US Dollar
- 61% of all open positions are short
- The nearest resistance is at 110.41
- Immediate support rests at 109.74
- Upcoming events: US Initial Jobless Claims, Philadelphia Fed Manufacturing Index
US homebuilding activity dropped in April; however, revisions of the preceding month's readings suggested that homebuilding activity continued improving. The Census Bureau reported on Tuesday that housing starts declined 2.6% to a seasonally adjusted annual pace of 1.17M units last month, following March's upwardly revised 1.28M-unit pace and falling behind expectations for a 3.7% rise to a 1.26M-unit pace. Analysts suggested that a slowdown in homebuilding activity had been driven by unusually rainy weather in California. On an annual basis, housing starts were up 10.5% compared to the same period a year ago.
Meanwhile, building permits fell 2.5% to a seasonally adjusted pace of 1.23M units, whereas analysts anticipated a slight climb of 0.2% to a 1.27M-unit pace in April. With building permits higher than housing starts, homebuilding activity is set to rebound in the upcoming months. Later in the day, the Federal Reserve reported that industrial production in the United States rose 1.0% in April, the largest gain since February 2014, while analysts expected industrial output to climb just 0.4%.
Minor US data
Events on Thursday are from the US side, namely the Philadelphia Fed Manufacturing Index. It is a spread index of manufacturing conditions within the Federal Reserve Bank of Philadelphia. Served as an indicator of manufacturing sector trends, it is interrelated with the ISM Manufacturing Index and the Index of Industrial Production. It is also used as a forecast of the ISM Index. The other event is the Initial Jobless Claims, which are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labour market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy.
USD/JPY attempts to undergo a correction
The USD/JPY pair experienced a rather devastating blow on Wednesday, losing more than 200 pips amid continued political turmoil in the US. After such a large slump the Buck is likely to undergo a bullish correction, unless political pressure keeps weakening the Greenback. Moreover, the monthly PP and the weekly S3 around 110.45 are providing rather strong support, which could be sufficient for a recovery to prevail. The nearest resistance rests at 111.40, namely the weekly S2, most likely marking the intraday high. The base case scenario is a close somewhere between 110.50 and 111.50.Daily chart
The hourly chart reveals that due to the fundamental fall of the Greenback against the Yen, the currency exchange rate has fallen below the support of the long ago measured broadening ascending wedge pattern. It is most likely that, as the turmoil of politics passes, new charts will be drawn up during a review of the pair.
Hourly chart
There are 61% of traders holding short positions today (previously 66%), while the share of buy orders added 10% points, having risen to a total of 59%.
Right now 53% of OANDA clients are bulls, shifting to a bull dominance situation. In the meantime, Saxo Bank clients have also increased their long position amount, as 58% of open positions are bullish.
Spreads (avg, pip) / Trading volume / Volatility
Traders are becoming increasingly bullish on the Dollar
According to the poll that gathered forecasts between April 18 and May 18, traders expect the US Dollar to appreciate to 111.60 yen in three months' time, while the forecast for March 31 was 117.66 yen. It is also worth noticing that 56% of all forecasts fall above 111 yen, which is still below the current spot price. The majority of people who voted expect the US Dollar to cost somewhere between 112.50 and 114.00 yen in three months, with 16% of the survey participants choosing this trading ranges. At the same time, the second most popular intervals were the 106.50-108.00and the 115.50-117.00 ones, with 14% of survey participants forecasting each of these trading ranges.